Most European universities lag behind the best universities in the Anglo-Saxon world. A key challenge is to raise resources per student in Europe to US levels. The Lisbon agenda demands fundamental reform of the European university system in order to enhance efficiency, yet avoid grade inflation, to foster more competition, to allow for much larger private contributions accompanied by income-contingent student loans, and to attract larger numbers of foreign students. European universities will be pushed to compete with each other, to offer better incentives and to generate substantially more income. Universities will be stimulated to provide sufficient diversity and quality to meet the demands of a growing and diverse student body. Their ambition should be to educate the best minds in society irrespective of whether their parents are rich or poor, academically inclined or uneducated. A shift from grants to loans and an increase in tuition fees are justified by high returns. Reform should lead to a better and more equitable system of European universities